ISLAMABAD: The Federal Government has announced a series of significant tax reductions in the Finance Bill 2026-27, aimed at revitalising Pakistan’s real estate sector and reducing the financial burden on property buyers and sellers nationwide.
Under the new measures, the advance tax on property sales has been reduced by half. Sellers on the Active Taxpayers List (ATL) will now pay a flat rate of 2.75% under Section 236C, down from the previous 5.5%. Similarly, buyers who are registered filers will benefit from a reduced advance tax rate of 1.25% on the fair market value of purchased properties under Section 236K, compared to the earlier rate of 2.5%.
In a landmark move, the Finance Bill officially abolishes Section 7E, which levied a deemed income tax on immovable properties by taxing owners on a notional 5% of income, regardless of whether the property generated any actual earnings.
The Federal Constitutional Court had already declared Section 7E unconstitutional and void ab initio in May 2026, and the Finance Bill now formally removes it from the statute books.
The government has also abolished the Capital Value Tax (CVT) on foreign assets held by resident Pakistanis. Previously, Pakistanis owning properties abroad were required to pay CVT on their declared foreign wealth. The removal of this tax is expected to encourage greater transparency and documentation of overseas assets.
Furthermore, the Finance Bill introduces important amendments to Section 76(8A) regarding inherited property. The cost of an inherited asset will henceforth be recorded at the fair market value on the date of the original owner’s death, ensuring that heirs are not subjected to capital gains tax on value appreciation that occurred prior to inheritance.
It is noteworthy that while registered filers receive considerable relief, non-filers and individuals on the Non-Active Taxpayers List will continue to face substantially higher punitive tax rates during property transactions, reinforcing the government’s broader strategy of incentivising tax compliance and expanding the documented economy.
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